Credit Advice to Avoid Bankruptcy

Financial problems are a dark cloud over your head. They rob us of our serenity and add to the stress of living. If you are having trouble managing your finances and you aren't ready to give up the fight by declaring bankruptcy, you need to take control. Now.

Apply for a Mortgage Modification

A mortgage that is too large for the household budget can make up a large part of many families' financial problems. A government-backed program, Making Home Affordable, can provide assistance to households on the brink of bankruptcy or another financial crisis. The program offers two options to help homeowners struggling: a refinancing option and a modification option. The refinance option allows homeowners who are "upside-down" (the home is worth less than the mortgage amount) or those who have limited equity. The modification option can modify the terms of your original mortgage, such as the interest rate and the terms of the loan. Either of these programs can help reduce your mortgage payment so you can budget for other expenses.

Seek Credit Counseling

For consumers on the brink of bankruptcy, credit counseling is a viable alternative. Credit-counseling agencies negotiate contracts directly with your creditors to help you pay off debt. The agencies can sometimes substantially your lower interest rates and your monthly payments. Instead of paying each individual creditor each month, you will pay the agency one payment, and then the amount is disbursed to your individual accounts. Credit-counseling agencies usually charge a monthly fee for their services. The fee is included in the monthly payment.

Make a Real Budget

Most households don't understand where the money goes. Real budgeting means accounting for every dollar and setting limits on spending. Once you make a budget, you need to find ways to trim the fat out of it. It's often the small things that steal much of our money. Items such as tobacco, alcohol, soft drinks and fast food often account for an extra $300 to $500 in expenses per month. If your household is on the brink of bankruptcy, these items should be eliminated. You should also eliminate nonessential costs such as cable television, magazine subscriptions and home telephone service (if you have cellular phones, you probably don't need a land line).